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Most companies treat service as a low-priority business operation, keeping it out of the spotlight until a customer complains. Then service gets to make a brief appearance - for as long as it takes to calm the customer down and fix whatever foul-up jeopardized the relationship. In Uncommon Service, Frances Frei and Anne Morriss show how, in a volatile economy where the old rules of strategic advantage no longer hold true, service must become a competitive weapon, not a damage-control function. That means weaving service tightly into every core decision your company makes. The authors reveal a transformed view of service, presenting an operating model built on tough choices organizations must make: (1) How do customers define "excellence" in your offering? Is it convenience? Friendliness? Flexible choices? Price?, (2) How will you get paid for that excellence? Will you charge customers more? Get them to handle more service tasks themselves?, (3) How will you empower your employees to deliver excellence? What will your recruiting, selection, training, and job design practices look like? What about your organizational culture?, and (4) How will you get your customers to behave? For example, what do you need to do to get them to treat your employees with respect? Do you need to make it easier for them to use new technology? Practical and engaging, Uncommon Service makes a powerful case for a new and systematic approach to service as a means of boosting productivity, profitability, and competitive advantage.

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On July 17, 2009, Zappos.com, a privately-held online retailer of shoes, clothing, and other soft-line retail categories, learned that Amazon.com, a $19 billion multinational online retailer, had won its Board of Directors' approval to offer to merge the two companies. Amazon had been courting Zappos since 2005, hoping a merger would enable Amazon to expand and strengthen its market share in soft-line retail categories. While Amazon's interest intrigued Zappos' senior executives, they had not felt the time was right--until now. Amazon's offer-10 million shares of stock (valued at $807 million), $40 million in cash, restricted stock units for Zappos' employees, and a promise that Zappos could operate as an independent subsidiary-was on the table. Zappos' financial advisor, Morgan Stanley, estimated the future equity value of an IPO to be between $650 million and $905 million; this estimate skewed the Amazon offer-at least in financial terms--toward the high end of Zappos' estimated market value. Hsieh and Lin, Zappos' CEO and COO, respectively, knew that much of Zappos' growth, and hence its value, had been due to the company's strong culture and obsessive emphasis on customer service. In 2009, they were focusing on the three C's-clothing, customer service, and company culture--the keys to the company's continued growth. Hsieh and Lin had only a few days to consider whether to recommend the merger to Zappos' board at their July 21 meeting.

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This article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading.

Many of the management tools and techniques used in service businesses were designed to tackle the challenges of product companies. Although they are valuable to service managers, they aren't sufficient for success. In this article, Harvard Business School's Frei explains why and urges companies to add some new ones to the mix. After years of extensive research and analysis, she offers an approach for crafting a profitable service business based on four critical elements: the design of the offering, employee management, customer management, and the funding mechanism. Just like a product that's going to market, a service needs to be compellingly designed, and management must field a workforce capable of producing it at an attractive price. Additionally, however, service firms must manage their customers, who do not simply use the service but also can be integral to its production: Because customers' involvement as producers can wreak havoc on costs, companies must also develop creative ways to fund their distinctive offerings, by providing a self-service alternative, for example, or by offsetting expenses with operational savings. A close look at successful service businesses - Wal-Mart, Commerce Bank, the Cleveland Clinic, and others - reveals that effective integration of the four elements is key. There is no "right" way to combine them; the appropriate design of one depends upon the other three. If managers don't get all four pulling together, they risk pulling the enterprise apart. Incumbents can fend off attacks from highly focused upstarts by becoming multifocused - that is, by pursuing multiple niches through optimized service models rather than trying to cover the entire waterfront with one model. Shared services within a firm (functions such as HR and finance) can help, since they will enable it to generate economies of scale and experience across models.

learning objective:

To learn how service companies can integrate their offering, pricing, and employee- and customer-management strategies to ensure high-quality service.

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Taught in the second module of a course on Managing Service Operations, which addresses the design of sustainable service models (606-031).

Commerce Bank has become one of the fastest growing banks in the country, despite having defied conventional wisdom about how to grow deposits. Banks historically have grown either by competing on deposit rates or through acquisitions that expand their deposit base. Commerce has the lowest deposit rates in each of the local markets it serves and has acquired no other banks, yet its growth rate is unparalleled. Its secret? Commerce differentiates itself on service. Explores the highly refined service model that guides the design of its operations and service features and considers the trade-offs involved in competing on service.

learning objective:

To explore how a company systematically designs and funds service excellence.

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On July 17, 2009, Zappos.com, a privately-held online retailer of shoes, clothing, and other soft-line retail categories, learned that Amazon.com, a $19 billion multinational online retailer, had won its Board of Directors' approval to offer to merge the two companies. Amazon had been courting Zappos since 2005, hoping a merger would enable Amazon to expand and strengthen its market share in soft-line retail categories. While Amazon's interest intrigued Zappos' senior executives, they had not felt the time was right--until now. Amazon's offer-10 million shares of stock (valued at $807 million), $40 million in cash, restricted stock units for Zappos' employees, and a promise that Zappos could operate as an independent subsidiary-was on the table. Zappos' financial advisor, Morgan Stanley, estimated the future equity value of an IPO to be between $650 million and $905 million; this estimate skewed the Amazon offer-at least in financial terms--toward the high end of Zappos' estimated market value. Hsieh and Lin, Zappos' CEO and COO, respectively, knew that much of Zappos' growth, and hence its value, had been due to the company's strong culture and obsessive emphasis on customer service. In 2009, they were focusing on the three C's-clothing, customer service, and company culture--the keys to the company's continued growth. Hsieh and Lin had only a few days to consider whether to recommend the merger to Zappos' board at their July 21 meeting.

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Pret A Manger, a London-based chain of sandwich shops, was known for its fast, genuine service and pre-packaged sandwiches prepared on-site daily. Instructed by its board to grow at 15 percent per year, Pret considered opening "twin" shops in locations too small to contain kitchens; these shops would receive sandwich deliveries throughout the day from a nearby "parent" shop. Would Pret's employees and customers accept twin shops or view them as counter to the Pret culture? Through this decision point, the case frames a discussion about how companies build service models to reliably deliver customer service excellence. The case also helps students understand the role of employee management systems in creating consistent service experiences and introduces a set of innovative employee management practices.

learning objective:

To analyze successful service models that promote consistently excellent customer experiences. To explore the roles of employee management systems in delivering service excellence and highlight innovative employee management practices. To examine the relationship between business models and customer experiences.

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Most companies treat service as a low-priority business operation, keeping it out of the spotlight until a customer complains. Then service gets to make a brief appearance--for as long as it takes to calm the customer down and fix whatever foul-up jeopardized the relationship. In "Uncommon Service," from which this chapter was taken, Frances Frei and Anne Morriss show how, in a volatile economy where the old rules of strategic advantage no longer hold true, service must become a competitive weapon, not a damage-control function. Your company must transform its view of service, weaving it into the core of your business. The authors make a powerful case for a new and systematic approach to service as a means of boosting productivity, profitability, and competitive advantage. This chapter demonstrates how to assess the impact your customers are having on your service operations and explains how to cultivate "customer-operators"--customers who don't just purchase a service, but also participate in creating it. (ZipCar, for example, depends on its customers to return their cars on time, gassed up, and ready for the next customer.) The chapter also explores the four components of a successful customer management system.

This chapter was originally published as Chapter 4 of "Uncommon Service: How to Win by Putting Customers at the Core of Your Business."

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Most companies treat service as a low-priority business operation, keeping it out of the spotlight until a customer complains. Then service gets to make a brief appearance--for as long as it takes to calm the customer down and fix whatever foul-up jeopardized the relationship. In "Uncommon Service," from which this chapter was taken, Frances Frei and Anne Morriss show how, in a volatile economy where the old rules of strategic advantage no longer hold true, service must become a competitive weapon, not a damage-control function. Your company must transform its view of service, weaving it into the core of your business. The authors make a powerful case for a new and systematic approach to service as a means of boosting productivity, profitability, and competitive advantage. In this chapter, the authors explain that just because a star employee can deliver excellent service naturally, it isn't necessarily true that everyone else can too. Using examples from Bugs Burger Bug Killers, Commerce Bank, Spence Diamonds, and Brazilian retail giant Magazine Luiza, they show how to build a service model that enables and motivates the average employee to achieve excellence as well.

This chapter was originally published as Chapter 3 of "Uncommon Service: How to Win by Putting Customers at the Core of Your Business."

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Most companies treat service as a low-priority business operation, keeping it out of the spotlight until a customer complains. Then service gets to make a brief appearance--for as long as it takes to calm the customer down and fix whatever foul-up jeopardized the relationship. In "Uncommon Service," from which this chapter was taken, Frances Frei and Anne Morriss show how, in a volatile economy where the old rules of strategic advantage no longer hold true, service must become a competitive weapon, not a damage-control function. Your company must transform its view of service, weaving it into the core of your business. The authors make a powerful case for a new and systematic approach to service as a means of boosting productivity, profitability, and competitive advantage. This chapter reveals how companies that have mastered service excellence can grow by either continuing to build on their existing service model, or building new service models within the existing organization. Using examples from companies such as Four Seasons Hotels, Southwest Airlines, Rackspace, Best Buy, CDM Group, Zappos, GE, and Interbank, the authors also show you how to overcome the challenges to service-based growth.

This chapter was originally published as Chapter 6 and the conclusion of "Uncommon Service: How to Win by Putting Customers at the Core of Your Business."

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Most companies treat service as a low-priority business operation, keeping it out of the spotlight until a customer complains. Then service gets to make a brief appearance--for as long as it takes to calm the customer down and fix whatever foul-up jeopardized the relationship. In "Uncommon Service," from which this chapter was taken, Frances Frei and Anne Morriss show how, in a volatile economy where the old rules of strategic advantage no longer hold true, service must become a competitive weapon, not a damage-control function. Your company must transform its view of service, weaving it into the core of your business. The authors make a powerful case for a new and systematic approach to service as a means of boosting productivity, profitability, and competitive advantage. This chapter shows the three ways great service organizations promote a company culture that drives service excellence, with examples from Southwest Airlines, Zappos, IDEO, Commerce Bank, the Mayo Clinic, and others.

This chapter was originally published as Chapter 5 of "Uncommon Service: How to Win by Putting Customers at the Core of Your Business."

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